Anonymity, Low Fees & Simplicity
Limited Liability Companies make up over half of new business formations in New Mexico. This is not a surprise if you take into account their benefits vis-à-vis other business entities.
Keep your personal information private.
There are no annual reports, filings or fees.
Everything is done online.
Every state writes different laws for their LLCs. Only a few states actively compete for new business formations. The four most common states for forming an LLC are New Mexico, Wyoming, Nevada and Delaware.
Anonymity, for example, is a benefit which is not available in most states. Most states, such as California, require the owners and managers of the company be listed. That's why choosing the appropriate state for your company is important.
Some of the most uses of New Mexico LLCs are for holding companies, e-commerce stores and other location independent industries. These groups come here to take advantage of the privacy and the low fees. The lack of an annual report contrasts with Wyoming which charges $50 and Nevada and Delaware which charge hundreds.
The simple formation process makes the LLC the most popular option for small businesses. Limited liability companies provide a corporate veil, reduce taxes and are more professional than a Sole-Proprietorship.
The corporate veil prevents corporate creditors from pursuing owners personally. The company signs its own contracts and has its own debts. An accident cannot cost you everything because your liability is limited to what is inside the company.
The new tax laws bring several opportunities for limited liability companies to reduce their owner’s income taxes and FICA payments. This applies whether you elect for pass through or corporate taxation.
Operating through an LLC is also more professional than using your personal name or a DBA. Clients and vendors are more likely to take you seriously when you put effort into starting a company.
Most of the time New Mexico LLCs are chosen because of their anonymity and the business friendly atmosphere the Secretary of the State has created. This atmosphere manifests itself via low fees and simple reporting requirements. New Mexico checks off a lot of boxes for small business. These includes:
Choosing between a corporation and an LLC is important. Many mistakenly believe they need a corporation for the S-Corp tax election. However, LLCs can taxed as if they were S-Corporations as well. The largest difference between the two entities is in their governance.
In this regard corporations carry a lot of baggage. They must have a board, shareholders and officers, e.g. a President, Secretary and Treasurer. There may also be multiple share classes with differing rights. It is also required that they have frequent meetings with minutes; the meetings should be documented with the minutes producible on demand.
In the other hand an LLC just needs to have members and they can optionally add managers. They are only required to hold one meeting and are not subject to corporate income tax. The increased complexity of a corporation lead most to choose an LLC.